KUALA LUMPUR: Analysts are revising higher their valuations for CTOS Digital Bhd
as the group's recent court victory has removed overhanging fears over its business model.
CTOS yesterday announced that the Court of Appeal had overturned a March 11, 2024, High Court case ruling that claimed the group was not legally empowered to formulate credit scores and was not provisioned in the Credit Reporting Agencies Act 2010.
The three-member bench chaired by Justice Lee Swee Seng unanimously ruled that credit reporting agencies do not owe a duty of care in common law.
Credit reporting agencies also may formulate and publish credit scores as part of their business of credit reporting pursuant to the provisions of the Credit Reporting Agencies Act.
In addition, the Court of Appeal ruled that the plaintiff, Suriati Mohd Yusof, had not made out a case in defamation, negligence or breach of statutory duties against CTOS Data Systems Sdn Bhd, a subsidiary of CTOS. The court had further dismissed the plaintiff’s cross appeal.
Shares in CTOS rallied on Tuesday following the decision, ending seven sen or 5.07% higher at RM1.45 apiece as investors welcomed the announcement.
However, the rally has so far failed to continue on Wednesday with the share price staying unchanged at RM1.45 as at 9.30am.
"This is a positive win for CTOS but we reckon that the market has baked in a victory ahead of today’s court outcome; this is because its price had recovered to RM1.45 a share from a low of RM1.05 a share when the negative High Court ruling was first announced," said Hong Leong Investment Bank (HLIB) Research in an update.
"That said, before the price plunge, CTOS only managed to reach a one-year peak of RM1.52 a share and most of the time it was oscillating sideways."
The research firm expects the share price upside moving forward to be limited. It reiterated its "hold" recommendation but raised the target price to RM1.60 from RM1.50.
RHB Research, meanwhile, maintained its "buy" call and raised its target price on CTOS to RM1.84 from RM1.77.
"We lower the risk premium given the legality of credit scoring in CRA business is now settled and the dismissal of this dangerous precedent stemming from the initial High Court’s ruling may prevent a floodgate of claims against CTOS," it said in a note.
Kenanga Research upgraded CTOS to "outperform" from "underperform" with a higher target price of RM2 from RM1.15 previously.
It said the risk premium overhanging the stock has evaporated with investors returning to appreciate the stock's key merits, including being a leading presence in credit reporting, its potential for synergistic gains, and scalable operations for future regional penetration.
